#153. Independent Owner Operator vs. Leased Owner Operator

Independent Owner Operator verses Leased Owner Operator is a bit of a controversial topic because you get strong opinions on both sides of the argument. I think that is because being an independent Owner Operator is the right thing for some people, while leasing on to another company can be the right thing for someone else. In this Episode of Haulin Assets the Podcast, I want to talk about the pros and cons of both, along with the things you need to keep in mind and watch out for to help you make the decision for yourself.

What To Expect From Episode 153

Let’s define each.

Independent Owner Operator, just like the name implies, you are truly independent. You have your own DOT number, you own or lease the truck you drive, in most cases, you have your own Operating Authority (MC Number) with the FMCSA (Federal Motor Carrier Safety Administration).

Leased Owner Operators, own or lease a truck and operate under the authority of another motor carrier.

Where things get confusing is the term leased is also used when leasing vehicles, think of that kind of lease as a long-term rental of the vehicle. That type of vehicle lease/rental is different the leasing on as an owner operator, they are two very different types of leases, but often happen at the same time between the same companies and can cause some very serious problems. We talk about that and why you have to be super careful in that type of situation. I'll put it this way, we don't recommend leasing or buying a truck directly from the motor carrier you are going to lease on to. Craig and I talk about why that is.

There are pros and cons of both and we talk about each.

Independent Owner Operator

Pros

• Truly Independent
• Higher financial upside
• You get to decide the type of loads you haul
• Lots of tax benefits
• Investment control
• Strong sense of ownership

Cons

• You have to find your own loads
• All responsibility falls on you
  • Bookkeeping
  • Sales
  • Maintenance
  • Admin tasks
  • MCHQ and Trackin Assets can help you navigate a lot of these
• Higher stress
• Takes more money to start
• Your insurance will likely be higher for the first year or two
• Isolation
• Unknown, unknowns 

Leased Owner Operator

Pros

• Many administrative tasks are handled for you
• You don’t have to find loads
• You will get some cost savings operating as part of a larger fleet
• Less financial risk
• Should have access to steady work
• Training and safety programs
• Great way to gain experience and use it as a stepping stone to becoming an independent OO

Cons

• You sharing the profit with another carrier
• You’re working for someone else and have to follow their rules and do what they say, you lose control
• Some companies will take advantage of you
• You may be the low man on the totem pole
• Some contracts can be very restrictive
• Ownership transfer issues

Other considerations

Independent Owner Operator

• Fraud
• You'll need a bigger reserve of money

Leased Owner Operator

• Talk to several owner operators who do work for the any company you are thinking about leasing on to
• Make sure you read through the entire lease agreement. Consider having an attorney review it. I know it costs money to do so, but it could save you money in the long run and prevent a lot of heartache.
• At Haulin Assets we don’t come down hard on either side of Independent O/O vs Leased O/O. We generally advise against lease to own. It’s not the subject of this episode so we won’t go into depth but things just seem to be more likely to go wrong with lease to own. The agreement is riskier, the lessees are generally not starting on a firm footing, and the lessors can have incentives for you to fail.Buy or lease your own truck, from somewhere other than the company you are leasing on too
  • Do your own truck registration/IRP plan (Another way they trap you)
  • This will take a bit more money, but is a much safer way to do it, less likely to be taken advantage of